GBP/USD Forecast: Bullish Rebound Amidst Economic Data Releases

The GBP/USD currency pair has been under significant pressure, driven by the strengthening US dollar and economic uncertainties. However, as we delve into the current market dynamics, there are signs of a potential bullish rebound.

Current Market Analysis

The GBP/USD pair has recently hit a crucial support level at 1.21, which was a major swing low previously. This area has shown a strong reaction, suggesting that the market may be oversold and due for a bounce. However, it’s essential to consider the broader economic context and the factors driving the market.

Key Economic Indicators

– **UK Inflation Data**: The UK’s Consumer Price Index (CPI) y/y is expected to hold steady at 2.60%[2][3].
– **US Inflation Data**: The US Core CPI m/m is forecast to slow to 0.20% from the previous 0.30%, while the CPI y/y is projected to edge higher to 2.90% from 2.70%[2][3].
– **US Economic Data**: The Nonfarm Payrolls (NFP) report for December revealed a substantial addition of 256,000 jobs, significantly exceeding market forecasts. This has boosted expectations for the Federal Reserve to maintain current interest rates (4.25%-4.50%) for a longer duration[3][5].

Technical Analysis

From a technical standpoint, the GBP/USD pair is in a descending channel, with moving averages indicating a short-term bearish trend. Prices have broken through the area between the signal lines downwards, suggesting pressure from sellers and a potential continuation of the fall[1].

However, the recent bounce at the 1.21 level suggests that the market may be due for a correction. The Relative Strength Index (RSI) is also indicating oversold conditions, which could lead to a bullish rebound.

Key Levels to Watch

– **Resistance**: The 1.2225 level is a critical resistance area. A test of this level could lead to a rebound in the pair’s quotes downwards[1].
– **Support**: The 1.2065 level is a key support area. A breakout below this level could confirm the fall of the pair[1].
– **Target**: The target for the pair’s decline is the area at the level of 1.1935[1].

Market Outlook

Given the current market dynamics and the upcoming economic data releases, traders should be cautious. The potential for a bullish rebound is present, but it’s essential to monitor the key levels and economic indicators closely.

– **Bullish Scenario**: A strong growth and a breakout of the resistance area with the price fixing above the level of 1.2305 could indicate a continuation of the rise on the Forex pair with a potential target above the 1.2665 level[1].
– **Bearish Scenario**: A test of the resistance line on the RSI and a rebound from the upper border of the descending channel could confirm the fall of the pair[1].

In the coming days, the market will be closely watching the UK’s inflation data, GDP, and retail sales data, as well as the US CPI report. These releases will provide crucial insights into the economic health of both countries and could significantly impact the GBP/USD pair.